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The latest in the federal racketeering trial of a former Ohio House speaker and the ex chair of the Ohio Republican Party and a bill that would rewrite Ohio's tax law as the top priority for the Republican House speaker.

How it will affect taxpayers, local governments and schools.

This week weekend, the state of Ohio.

Welcome to the state of ohio.

I'm karen kasler.

After seven long weeks in the federal courthouse in cincinnati.

Republican former Ohio House speaker Larry Householder and former Ohio Republican Party chair Matt Borges were each found guilty of a single count of racketeering.

A little over a day after jurors got the case, Householder and Burgess were accused in a $61 million bribery scheme to pass the nuclear power plant Bailout law House Bill six for First Energy in 2019, with the help of the dark money group Generation.

Now and stopping a repeal of that bail out from going to voters.

Both Householder and Burgess spoke to reporters outside the courthouse after the verdicts were read, saying they disagreed with those verdicts and will appeal.

If you win on appeal, what do you do at that point?

Get back into politics.

Oh, I don't know about that.

I have no up here.

It's a this is all I was surprised by the verdict, so I haven't thought that far ahead.

Why were you surprised?

Oh, I feel I'm not guilty.

Anything you want to say to the people of Ohio?

Yeah.

I remain committed to the people of Ohio.

I've always been committed to the people of Ohio.

And I think that the justice system is what it is.

And there's a process.

And this is one step to the process.

And we're going to utilize every process we can in the judicial system until we get it right.

I did not believe that anything proved that I would committed and that I had engaged in a racketeering conspiracy, which is why I fought this from the beginning.

So it's really not much else to say about it at this point in time.

Maybe at some point I'll have further thoughts on those kinds of things, but I haven't really given a lot of thought to that right now.

They each face 20 years in prison.

A sentencing date has not been set.

Federal prosecutors say this case is the largest corruption scandal in Ohio history.

We'll have more on this next week, including some thoughts from an FBI informant who testified for the prosecution.

The bill that Republican House Speaker Jason Stevens considers his top priority, House Bill one is starting to move through the legislature.

The bill seeks to rewrite the tax system in Ohio through two parts a flat income tax and property tax changes.

The flat tax part is pretty straightforward reducing all four income brackets that pay the state income tax to two and three quarter percent, people making under $26,050 would still pay no income tax.

The property tax elements are more complicated.

House.

However, one would eliminate the state's 10% property tax rollback, reduce the percentage that determines homeowners property taxes on the appraised value of their homes from 35% to 31 and a half percent.

Increase the homestead exemption for seniors and replace the two and a half percent rollback for Ohioans who live in the homes they own.

With a $125 flat rate as well.

That's not complex enough.

There's a measure of price inflation or deflation in the bill called a GDP deflator that could reduce the property value assessment percentage to 27.9% in six years.

And there's also House Bill 920, which was designed to keep inflation from increasing taxes on previously approved levies.

The bill has support from the Ohio chapters of Americans for Tax Reform and Americans for Prosperity and the Ohio Manufactured Homes Association.

But to critics, the bill appears to use the property tax changes to pay for the income tax cut.

I talked with economist Howard Fleder, who is the leading authority on funding for the state's more than 600 traditional public school districts.

When the dust clears on this, you're getting not only a decrease in in school and local government revenues of over half a billion dollars, but you're also getting a $929 million tax increase for farmers and homeowners.

And that brings me that.

That brings me to my next question.

The effect is different on business and commercial property owners and their property taxes.

Right.

And so that's that is also something which I don't think the framers of this bill intended to have happen, right.

When I think their idea was we eliminated the 10% rollback for homeowners.

So we want to reduce the value of their property.

What they didn't understand was that the way you know, that Ohio property tax law mandates that the assessment percentage be the same on residential and agricultural property as it is on business and commercial property.

So even though I think they probably wanted to leave that business and commercial property tax payers out of this, they have to lower their their assessment percentage as well.

And so that results in $157 million decrease for those property tax payers, which is part of that over half a billion dollar reduction in state and local tax revenues.

I asked me, I asked Speaker Jason Stevens, this is House the one.

So it's a priority, Bill, for him whether this could mean that schools might have to put more levies before voters.

And he said not necessarily.

It could, but obviously communities could decide to put levies on the ballot if they want more services or different services.

But school levies are not a sure bet for school districts.

No, I think schools and local governments are going to find themselves between a rock and a hard place on this issue.

Right, Because they're not only losing, you know, $538 million is the estimate.

$298 million of that is for schools and the rest of it, about 240 million is for the other local governments.

They're going to lose those revenues.

It's going to compromise their services.

I think their first choice would be to try to go to the voters and recoup that revenue so they can continue delivering services at the same level they are right now.

That's going to be a very tough hill for them to climb, though, for two reasons.

The first is these same voters that they're going to be asking to approve.

New levies are just.

Just received a $929 million and voted tax increase as a result of this plan.

That's not going to put most people in a very favorable mood when they're given the chance to vote their taxes even higher.

And the second thing is that for school levies, I track those.

And since 2014, the passage rate for new school levies is only 30%.

So 20 years ago, the passage rate for new school levies was 70%, and it has been declining very steadily.

And school districts complain all the time about levy fatigue.

One of the ramifications of House Bill 920 that stabilizes revenues for, you know, from the homeowner's perspective is that it also doesn't allow growth from inflation for schools and local governments.

We go to the ballot more often than any other state in this in this country as a result of having the most stringent property tax limitation.

So, you know, this is you know, this is there's you know, there's three challenges of if local governments are going to want to try to recoup that more than half a billion dollars in lost local revenue.

Right.

Because one, we already vote a lot to your people.

You're asking me to vote for more levies.

Just have gotten a very, very large tax increase.

And three, like, you know, the the inclination to pass new levies is not been very high in this state.

You know, renewal levies pass 85 to 90% of the time.

But asking for new money has gotten a lot harder in the last ten years.

You've been doing this analysis and in this area of property taxes, income taxes and school finance for ever, you are the expert on school finance in the state of Ohio.

What do you think in terms of the complexity and the potential impact of this bill?

I've been doing this since 1994, over 30, 30 years.

And this is by far the most complicated piece of legislation I've seen as far as it affects state and local government.

And it is also, I think, maybe the most concerning piece of legislation I've seen as well.

I think, you know, my my school and local government clients, I think, are viewing this as a five alarm fire right now.

And, you know, I'm I'm trying to figure out, because I think many of us were surprised to see the property tax features of this bill.

And I think there's been a lot of clues that the income tax was going to be changed and that they were going to move in the direction of a flat tax.

That was not that big a surprise.

But to me, the property tax changes were out of the blue.

And I don't know if that was, you know, just because saving $1.3 billion in state payments helps them fund their property tax decrease, or if this is also, you know, in some sense a property tax revolt or if it's both.

And so I I'd like to get some clarity on what the goals and objectives are as far as what they're trying to do.

House Bill one would also have a huge impact on local governments, including Ohio's 88 counties.

Dan Dean is the Taxation and Finance Committee chair with the County Commissioners Association of Ohio and is a Republican commissioner in Fayette County in central Ohio.

The concern for counties, as it always, is anything that affects our revenue and our two biggest forms of revenue, our course sales tax, and then our inside millage from property tax.

And the inside millage is what this bill will directly affect.

We counties, like everybody else over the last few years, we've felt the economic impact of inflation and the cost to provide essential services to our constituents is ever going up.

One of the things that helps us keep up with it is that both sales tax and property tax are reassessed every year or so, and especially property tax.

And the values go up and our inside millage goes up and helps us keep pace with what we need to do to provide by capping this, or even worse, reducing it.

It's going to prevent our ability to provide the services the way we are now.

What kind of services are we talking about?

Everything that's inside the general fund.

So it would be everything from the sheriff's department, auditor, treasurer, the court system, as well as things like in our county, we provide service for like OSU extension for H, our senior citizen center.

We we pay for it and we don't even have a park district lobby.

We've been helping keep them steady so we don't have to do additional property taxes on our our constituents.

And when I spoke to House Speaker Jason Stevens about this, since it's his top priority, Bill and I asked whether this could mean more tax levies for counties, for school districts, that sort of thing, he said, not necessarily, but it could and that local voters get to decide that.

Do you expect to potentially see more levies across the state?

How do levies do now with voters?

The levy on how they do depends on the county and what you're trying to sell on the levy.

For instance, in our county two years ago, we replaced our jail.

We went to the voters.

Our jail was an 1885 jail is one of the oldest ones in in the state.

But we now have a brand new 120 bed jail and and our voters supported us on that.

That's one of the first levies that we've ever put on to help the general fund out.

And basically, it's a bond levy that that pays the bill.

But as far as other types of levies, we would have to look at those.

It depends on how much cuts we actually get in this and how deep it ends up with.

Ohio, cities and villages are also worried.

The Ohio Municipal League says in a statement Ohio is more attractive when its communities are safe and provide a high quality of life.

Municipalities are rightfully concerned with many of the provisions in House Bill one, and especially with the vagueness of how local entities would be kept financially whole on top of the property tax changes that would decrease funding to locals.

The state will have less in its local government fund because it will not be receiving as much overall revenue based on the proposed income tax cuts.

Municipalities rely on these types of funds for critical services such as police, fire and maintenance and construction of streets.

As it stands, House Bill one exacerbates past cuts to local government without providing a sustainable long term solution for Ohio communities and the residents they serve.

The bipartisan Ohio Mayors Alliance says of House Bill One at a time when cities are driving regional growth and helping to attract some of the largest economic development projects in our state, we urge the legislature to proceed with extreme caution on any proposal that would undermine the fiscal health of local governments.

Right now, it is imperative that cities have the necessary resources to continue investing in public safety, which is already the largest single budgetary expenditure in nearly every city in Ohio.

If passed in its current form, House Bill one would jeopardize these investments and it would have even greater fiscal impacts on other key community partners like our schools.

But there are also other issues.

The 30 bipartisan members of the Ohio Mayors Alliance are focused on.

I talked about some of those with two of them, Democrat Justin Bibb of Cleveland and Republican Christina Moran of Finley.

So, Mayor Bibb, going ask you, $40 million for the state, for de-escalation training, for law enforcement, is that enough?

Well, we could always use more.

And this is critical for me and Cleveland.

As you know, we are under our second consent decree under the Department of Justice right now.

And we are trying to lead the country in terms of police reform and police accountability.

And we've seen already dramatic progress in our use of force.

Cases against police have gone down, complaints against officers have gone down.

But more training, more resources.

It all goes a long way to restoring that trust between police and the residents.

And we're grateful for the governor's investment on this effort.

We are really needs are different in smaller communities than they are in bigger communities.

Are you concerned that that $40 million won't reach smaller communities like yours, where their needs are just different than big city needs are?

You know, I have a little bit of concern that we're putting dollars toward specific programs, and I think that that is really beneficial.

Right?

Because we recognize that somewhere that some of those are the proven ways to address certain issues and that needs to occur.

I think that the administration has been working really well with mayors to identify what those should be.

I do think that I'd like to see more general consistent funding to support law enforcement across the state.

And reason being because, you know, Cleveland is different than Findlay.

And we recognize, okay, we already are doing a lot of the different training.

We're doing de-escalation, we're doing crisis intervention, we're doing bias training, all of these different components.

We're clear accredited, you know, the international accreditation.

And so the resources that we need are more so on the infrastructure.

Bodycams dash cams.

And we're fortunate that we did receive some grant funding from the state for that.

But those are those longer term expenses that if our departments had the ability to pay for them, that allows us to then have a little more flexibility.

So I would encourage, again, going back to that flexibility, great to specify funding for certain programs, but also giving communities some freedom to address their local issues.

Moving back from the budget and just to get into some big picture ideas, what's the future for tax revenue for cities?

There are legal challenges to whether those who work remotely in suburbs or rural areas still have to pay taxes to the cities where their offices are located if they're not going into the offices.

So let me ask you, Mayor Moran, what is the impact of that on Finley?

Yeah, So, you know, long term revenue definitely is a conversation.

And the big message that our communities have been having at the state level is let's not make sure that let's not change too many variables at one time.

Let's have a big picture conversation and make sure that our state is competitive on a tax basis, that our cities have consistent funding.

And in my opinion, making sure that our communities continue to be competitive.

So when the city of Finley is looking at work from home, we haven't seen a huge impact from that because we have a very diverse economy, heavily manufacturing based, and you can't do that from home.

So we've been fortunate that we haven't seen a huge impact from that.

But I think when we talk about the long term financial plan for how our cities are funded, that is a very complex topic that the mayors need to be at the table for.

And we shouldn't be looking at any short term changes until we have sustainability and and stability for our communities coming out of the pandemic.

Another area where there's a big difference between the needs of smaller cities and big cities like Cleveland.

So what is the impact of potentially losing that revenue from remote workers?

It's major, and I would argue most mayors across state have the same opinion when it comes to protecting our local income tax.

We're going through our budget season right now in Cleveland and our income tax represents nearly 70% of the entire revenue of my city.

And so this legislature decides to cut that revenue base.

That means I'm laying off hundreds of firefighters, police officers, public works workers.

To me, that's unacceptable.

And so it's important for us to think about a competitive tax policy to make this one of the best states in the union do business, but not at the expense of our cities.

That's responsible for a large share of the state's GDP and economic competitiveness.

And so it's important that we have a conversation about what's the right tax climate, but how do we do it in a way that's going to protect Ohio's cities?

Another issue that's critical for mayors, all of you, regardless of political affiliation, is home rule.

Let me start with Columbus in Cincinnati, who filed lawsuits to get back the authority to pass local gun ordinances.

So let me ask you just starting there, Mayor Bibb, is home rule a topic that lawmakers embrace with some subjects and maybe not so much with others?

They like to picket their employees and when they want to, based on maybe what side of the bed they got up on that day, I have no idea.

But it's important that we as mayors have every tool we can to fight and cut down on violent crime.

It pains me that on a daily basis I hear about gun violence in my city and that I can't enact laws to cut down on violent crime.

It's unacceptable.

Even this local most recent attempt to undermine our ability to cut down on tobacco use.

My city has the highest smoking rate in the country and I'm really proud that Governor DeWine vetoed that legislation to give my city the ability to enact laws at the local level to protect the public health of my residents.

So we as mayors need more local control because self-government is the best type of government.

And of course, you're talking there about the ban on cities.

Absolutely banning flavored tobacco.

I want to ask you, is Cleveland considering joining a lawsuit or filing a lawsuit over a local bar?

We are exploring that with our other big city mayors across the state.

Absolutely.

Mayor Moore, let me ask you, home rule is a little different when it comes to certain policies, but do you feel like the legislature kind of picks and chooses what topics that they want to give you control over versus what they want to tell you what the rules will be?

Yeah, we've definitely seen that.

And, you know, as Mayor Bibb mentioned, it could be on huge and really important topics like gun control, but it also can be on topics like the tobacco.

And I think one, sometimes we get caught up in the political aspect of, you know, what, we got to protect our citizens from these mayors implementing these, you know, stringent rules.

But if you also look at the kind of minor details and the ripple effects, the law that was being passed can preventing mayors from being able to implement policies, for example, not allowing smoking in public spaces like parks.

You know, so I think that one, we very frequently kind of overlook this big political hot button that we can gain points on for the actual implementation and effectiveness of building stronger communities.

While we're in the politics area.

Let's just go for it.

You know what?

The Mayors alliance is about 2 to 1 Democrats, you do have Republican mayors.

We do Mayor run Bostonians.

We were created Schaeffler of my hometown of Lancaster, former State Senator Peggy Langner from Kettering.

Do you think that there is an adversarial relationship between mayors and local governments and the state legislature?

At times?

But I think we've really seen it shift over the last decade because we have to work together, right?

I think we have recognized that as a state to be competitive, we have to work together.

We have to get rid of regulation that is not moving our communities forward.

We have to be able to say, hey, this is the issue that my community is experiencing.

And just because you're a Democrat or a Republican or even just see a different point of view than I do as a Republican or as a Democrat, you know, in the same party, we can't just say I'm done.

I'm walking away that that achieves nothing.

And so I think from organizations like the Ohio Mayors Alliance saying, what do we agree on?

And, you know, finding that balancing of sometimes, you know, some mayors feel it doesn't go far enough, Other times other mayors feel it goes too far.

And we really try to walk that balance of, okay, but what do we really agree on that we can all advocate for, to be able to make progress?

And maybe if you have the additional challenge and a lot of the leadership in the legislature comes from rural areas and the leadership that's from cities is in the deep minority.

So do you feel that there's an adversarial relationship here?

You know, I think sometimes we have heated conversations about important topics, whether it be abortion, gun control.

But I would say this.

We as mayors, don the luxury of being adversarial because our residents want us to get stuff done.

And to me, governing is about building relationships.

And that's why I'm so proud to be a member of the mayors lines so that I can be in Columbus talking to members of the legislature, spending time with the DeWine, who state administration, talking about my priorities for Cleveland, and how to work with Columbus to make sure we're advancing one of the most important cities in this state.

If I'm adversarial with leaders down here, then it undermines my ability to lead Cleveland.

And so we always had to be building those relationships with a strong spirit of bipartisanship.

And I think if I may, I think another benefit, you know, the Ohio Mayors Alliance, the U.S. Conference of Mayors has other opportunities, is there's only one mayor in every city.

And so it can be, you know, lonely leading that.

And so it gives us an opportunity to call mayors, you know, across the state.

And, for example, you know, Mayor Bibb has the relationships with the representatives in his district.

And if we understand each other's problems specific to our communities, they can help advocate and say, hey, I have this really kinship.

I understand this problem a little bit better than, you know, if we didn't have the ability to become friends to talk about the issues, to build that consensus and understanding.

So I think it's really important that, you know, we lose that at the federal level.

So much that I remember Congressman Oxley used to say, you know, they would go to each other's birthday parties or their kids birthday parties or they'd have dinner together.

And for some reason we've gotten to this culture where if you sit down and somebody who takes a picture of an and having, you know, a cup of coffee, you know, we're we're we're evil because we're talking to somebody from the other side.

And and I think it's good to have those relationships to be able to say, no, that's how you get things done.

And that's it for this week for my colleagues at the Statehouse News Bureau of Ohio Public Radio and Television.

Thanks for watching.

Please check out our Web site at state News dot org and follow us and the show on Facebook and Twitter.

And please join us again next time for the state of Ohio.

Support for the statewide broadcast of the state of Ohio comes from medical mutual providing more than 1.4 million Ohioans.

Peace of mind with a selection of health insurance plans online at med mutual dot com slash Ohio by the law offices of Porter Wright, Morris and Arthur LLP.

Now with eight locations across the country, Porter Wright is a legal partner with a new perspective to the business community more at Porter Wright dot com and from the Ohio Education Association representing 124,000 members who work to inspire their students to think creatively and experience the joy of learning online at OHEA.org